Income Insights

Is it possible to invest effectively in renewable energy without the stocks of world’s two largest producers of wind and solar? Standard & Poor’s apparently wants us to find out.

This morning, America’s leading wind and solar power producer NextEra Energy (NYSE: NEE) announced outstanding Q3 results. This first major renewable energy producer to report gives solid confirmation that the global energy transition is alive and well, no matter what happens at the ongoing UN Climate Change Conference.

I’ve been an adult volunteer for Scouting BSA since my oldest son entered Tiger Cubs almost 20 years ago. So I wasn’t going to pass up the opportunity to accompany my youngest to Philmont Scout Reservation in northern New Mexico earlier this month, my third and likely final trek to scouting’s paradise.

Unlike the highways my oldest son and I took on our cross-country journey in early June, there’s not a lot of connectivity in the backcountry. And I’d never have been able to stay off the grid were it not for the support of Elliott Gue, my partner of more than 8 years at Capitalist Times.

Nonetheless, as with the June trip, I picked up several investment insights I’d like to share with you now.

Too many small owners lacking critical scale, and unprecedented roadblocks to new energy pipeline infrastructure was at the core of the wave of US oil and gas midstream dividend cuts and bankruptcies of the past few years. But now those same forces are spawning something considerably more positive for investors.

In the May 18 Alert “Hold AT&T for Now,” I advised “sticking with our shares until the immediate market reaction shakes out.” That remains my advice for four reasons.

There’s no doubt AT&T Inc (NYSE: T) faces some steep challenges in early 2021. Just days before the company announced Q1 earnings last week, a Wall Street Journal piece featured the views of a prominent bear under the headline “Is AT&T a Train Wreck?” 

The company’s Q1 numbers and updated guidance, however, paint a far different picture.

Even without a repeat of the company’s Q1 windfall, the benefits to Kinder Morgan Inc.’s (NYSE: KMI) underlying business and balance sheet are likely to continue flowing throughout the rest of 2021 and beyond.

Yieldcos made their debut in the middle of the previous decade, as renewable energy’s answer to master limited partnerships but waned in popularity as MLPs collapsed, and the Trump administration instituted policies unfriendly to renewable energy. But there are two very good reasons to expect an eventual return of yieldco IPOs.

Exhaustive reviews, impossible public interest standards and no guarantee of eventual success: That’s the consensus outlook for mergers and acquisitions activity under the Biden Administration. Nonetheless, utility M&A is alive and well.

Our advice to heed the lessons of Robinhood.com has already proven timely: Build capital gains on solid business fundamentals, cash out of high-flyers and invest in successful adopters of wind and solar.